Next Generation Supply Management Defined

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Monthly Archives: October 2012

In Federalist No 28, Hamilton continues his discussion on the idea of restraining the legislative authority in regard to the common defense. With respect to this essay, there is again no substitute for the words of Hamilton.

THAT there may happen cases in which the national government may be necessitated to resort to force, cannot be denied. However, the idea of governing at all times by the simple
force of law has no place but in the
reveries of those political doctors whose sagacity disdains the admonitions of experimental instruction.

Because, independent of all other reasonings upon the subject, it is a full answer to those who require a more peremptory provision
against military establishments in time of peace, to say that the whole power of the proposed government is to be in the
hands of the representatives of the people. This is the essential, and, after all, only efficacious security for the rights and
privileges of the people, which is attainable in civil society.

Oompa Loompa Doom-pa-dee-do
We can’t stop building products for you!
Oompa Loompa Doom-pa-dah-dee
If you are wise you’ll try it tout-de-suite

What do you get when you’re UI obsessed?
Teams of coders who are distressed
Until they reduce the clicks to one or two
That’s what the ‘loompas will do for you.

Coupa is still trying to make the easiest end-to-end e-Procurement platform on the market, and still innovating new releases on a quarterly cycle.

So what’s changed since our last update in July?

A greater focus on the front office.

A stronger focus on supplier support.

Better Inventory Management.

Universal Search.

Transactional Spend Analysis.

A greater focus on the front office.
This shows up in the form of better budget visibility and better contract management. In Coupa, a user can see what the budget impact of a requisition will be before they submit it, not after the fact. This feature is more powerful than it appears to be on the surface. For example, in one large retail client, every department that used Coupa was under budget, while every department that did not use Coupa was over budget. When people see the impact of a purchase before they make it, they are much more frugal.

With respect to contracts, Coupa has set up a “contract dropbox” where all contracts can be uploaded to the system and real-time spend dashboards by contract. Again, this may not sound that important until you realize that without such dashboard, the average user in an organization does not see the importance, and impact, of a contract. When spend quickly adds up, it becomes clear not only which products and suppliers are critical to the organization, but which contracts — and it also becomes a trivial exercise to determine the cost of buying off contract, which is where a lot of the savings leakage occurs in an average organization. The reality is that most savings available to an organization in the majority of non-strategic and non-high dollar categories lie in off-contract spend. In many organizations, just getting the majority of spend on contract can increase savings 50%. (Given that, on average, savings leakage is 40%, and the majority is due to maverick spending, shifting another 30% of spend on-contract where only 60% of spend was on-contract before increases savings opportunities by 50%.) For example, one company saved 120K in one year just be getting bottled water on contract with Staples!

A stronger focus on supplier support.
Suppliers, who are never charged by Coupa (as this greatly increases the odds that they will use the system) will soon be able to invoice their Coupa clients any way that they want to. In addition, a lot of effort has been put into insuring that their UI is as easy to use as the buyer’s UI.

Better inventory management.
Coupa has created a new API for inventory management and the system can automatically determine if the order is for internal inventory or external inventory. In addition, it now supports configurable lists for items bought on a regular schedule, which support par levels and auto-buy calculations based on current inventory to make it simple for a user to do regular re-orders. In addition, the system can auto-generate GL codes based on user, department, and commodity so that the re-order is charged against the right budget and filled by the right contract.

Universal Search.
One thing that Coupa learned is that its average user did not want to leave Coupa and punch-out to a third party site to find a product or service they needed to accomplish their day-to-day job. In response, Coupa now includes punch-out and other external products and services from partner-sites through scraping and auto-loads. In addition, they have integrated back-end reporting that lets Procurement know when prices change.

Transactional Spend Analysis.
They have implemented a basic data analysis tool (GoodData) that lets a user slice and dice spend by contract, commodity, department, and other basic measures so that they can better understand the Spend Under Management through the Coupa System. While not a replacement for a full-fledged Data Analysis Engine, it now has the same power as any package that contains a canned set of spend visibility reports and a basic report building engine, which is impressive for a Procurement platform. No more heavy lifting in Excel for the simple stuff for sure!

Oompa Loompa Doom-pa-dee-do
They can’t stop building products for you!
Oompa Loompa Doom-pa-dee-dar
They have the goal to take your spend far.

In Federalist No. 27, Hamilton continues his consideration of the idea of restraining the legislative authority in regard to the common defense. In this particular essay, there is no substitute for his words.

Unless we presume at the same time that the powers of the general
government will be worse administered than those of the State government, there seems to be no room for the presumption of
ill-will, disaffection, or opposition in the people. I believe it may be laid down as a general rule that their confidence in and
obedience to a government will commonly be proportioned to the goodness or badness of its administration.

It will be sufficient here to remark,
that until satisfactory reasons can be assigned to justify an opinion, that the federal government is likely to be administered in
such a manner as to render it odious or contemptible to the people, there can be no reasonable foundation for the supposition
that the laws of the Union will meet with any greater obstruction from them, or will stand in need of any other methods to
enforce their execution, than the laws of the particular members.

The plan reported by the convention, by extending the authority of the federal head to the individual citizens of the several
States, will enable the government to employ the ordinary magistracy of each, in the execution of its laws

Any
man who will pursue, by his own reflections, the consequences of this situation, will perceive that there is good ground to
calculate upon a regular and peaceable execution of the laws of the Union, if its powers are administered with a common
share of prudence.

In our last post, we assumed that you need to find a new solution, either partial or full, for one or more of your supply management functions (procurement, sourcing, logistics, inventory management, etc.) and discussed the second (set) of question(s) you need to ask when initiating the process to find a new solution. Today, after determining that you need a new solution and have time to find (and implement/integrate) one, and that you know what the critical functionality of that solution needs to be, we are going to discuss the next (set) of question(s), which is:

(03) Do you go with an end-to-end solution (suite) or best-of-breed point solution(s)?

In order to make this determination, you need to answer:

(03.1) What are the relative costs?
(03.2) What are the relative benefits?
(03.3) What is the ROI?

and look at the answers over multiple time-frames, with 3 years, 5 years, and 7 years being common (especially if there are solutions with significant up-front license, implementation, integration, and/or training costs or long term benefits, such as support for upcoming regulations or standards).

When looking at the benefits, you need to look at the ability to reduce hard costs (by freeing up resources for other activities or by providing you the ability to strategically source more and get more costs under control), reduce soft costs (by facilitating SRM, minimizing support or third party system costs, etc.), and generate value (through better support for New Product Development, an open system that can be used by the entire enterprise for Contract Management [for example], or significant analytic capabilities).

When calculating the ROI, you need to assign each benefit an associated dollar value for the time period in question, and then calculate the expected ROI of an end-to-end solution for the target timeframe(s) and the expected ROI of (a) best-of-breed solution(s) for the target timeframe(s). If one is clearly greater than the other, then that is the path you should take. If they are about equal, you generally sway towards the solution with the quicker implementation timeline. After all, given the choice between generating an ROI in 3 months or an ROI in 12 months, which is going to make your CFO and CEO happier (and allow you to get more of the technology and talent you need to succeed)?

In Federalist No. 26, Hamilton considers the idea of restraining the legislative authority in regard to the common defense.

This particular essay has one of the most interesting starts:

IT WAS a thing hardly to be expected that in a popular revolution the minds of men should stop at that happy mean which
marks the salutary boundary between POWER and PRIVILEGE, and combines the energy of government with the security
of private rights. The concern herein is that A failure in this delicate and important point is the great source of the inconveniences we experience and while we may try change after change within such a system, we shall never be likely to make any material change for the better.

In this piece, in which Hamilton argues that the idea of restraining the legislative authority, in the means of providing for the national defense, is one of those
refinements which owe their origin to a zeal for liberty more ardent than enlightened, he states that if experience has not wrought a deep and solemn
conviction in the public mind, that greater energy of government is essential to the welfare and prosperity of the community before going on to give us more history lessons.

He gives us the example of England, where authority of the monarch was almost unlimited after the Norman Conquest, until the revolution of 1688 where English liberty again reigned triumphant with the introduction of a bill of rights that included an article that said the raising or keeping a standing army within the kingdom in time of peace, UNLESS WITH THE CONSENT OF
PARLIAMENT, was against law. In that kingdom, no security against the danger of standing armies was thought requisite, beyond a prohibition of their being raised or kept up by the mere authority of the executive magistrate. This caused the armies to swell to massive numbers, almost 30,000 under James the II, which gave the monarch too much power. As a result, England needed this rule. However, this does not justify a similar provision in the US Constitution as there are no monarchs, or representatives thereof, who have great power that can be abused as all power in a republic rests in the hands of the people. The people elect the legislature, and the legislature, on their behalf, determines the need for standing armies and military strength. Plus, the fact that the proposed constitution restrains the appropriations of money for military purposes to the period of two years means that the legislature of the United States will be OBLIGED, by this provision, once at least in every two years, to deliberate upon
the propriety of keeping a military force on foot; to come to a new resolution on the point; and to declare their sense of the
matter, by a formal vote in the face of their constituents. Thus, no further restraint is needed.